In Hirachand v Hirachand and another [2024] UKSC 43, the deceased’s will granted the entire estate to the widow. His daughter, who has severe health problems and insufficient assets and income to support herself, brought a claim for reasonable financial provision from the estate, under the Inheritance (Provision for Family and Dependants) Act 1975. The daughter’s claim was funded through a conditional fee agreement (CFA) with a 72% success fee.
Hirachand raised the question of whether success fees can be paid out of a deceased person’s estate as part of a financial provision order. Generally, costs recoverable in litigation must not include any success fees paid to lawyers or others, under the Courts and Legal Services Act 1990.
Five Justices held Parliament had not intended an exception to be made for financial provision orders. Therefore, clients making a claim on an estate cannot use the estate’s assets to pay their success fees.
Amanda Smallcombe, partner in Birketts’ private wealth disputes team, said: ‘While the Supreme Court’s decision may be seen as hindering access to justice for some claimants, it is good news for beneficiaries of estates defending such claims.
‘Many Inheritance (Provision for Family and Dependants) Act 1975 claims by their nature are brought by people who lack financial resources to pay legal costs and the decisions of the lower courts allowed successful claimants to keep the entirety of the amount awarded to them from the estate for their needs rather than it being eroded by legal costs, but this necessarily meant that the other beneficiaries received even less from the estate.
‘Solicitors will still take such cases on a no win, no fee basis, but the fact that the success fee will now be payable by the client means that it will be incumbent on all sides of these disputes to work collaboratively to resolve them quickly and cost effectively to preserve as much of the estate for the people involved. Claims under the 1975 Act are ideal for mediation and the parties should consider this even more so now.’
Speaking to Lexis+ UK, Brie Stevens-Hoare KC, barrister at Gatehouse Chambers and counsel for the appellant, said: ‘Parliament decided the courts should not make costs orders requiring one person to pay another person’s success fee under a CFA.
‘Hirachand addresses the growing practice of seeking to avoid that prohibition by sweeping the success fee into the award. This decision will ensure applicants who use CFAs to access justice will pay the price of their costs being conditional just as all other litigants using CFAs have to. It would have been a very curious situation if beneficiaries who were being deprived of part of their entitlement/inheritance without any wrong on their part were in a worse position than wrongdoers facing claims based on their wrong doing. The decision applies whether the claim proceeds in the family or civil courts.’
.tmb-mov69x69.jpg?sfvrsn=775f80cc_1)
